It’s been a while since we issued an update on fundamentals. The better we understand the exact mechanisms at play, the better we will understand the unfolding economy over the near term future. 

As we all know, Covid-19 and the ensuing public health shutdowns had a major negative impact on the economy. In economics terms, factory shutdowns lead to lower supply of many products, while at the same time, demand patterns shifted such as the shutdown of large portions of the travel and restaurant sectors. The net effect ended as a decrease to US GDP by $500 billion or 2.3% for the year which would have been considerably lower without government intervention. For reference, GDP growth was -2.75% in 2008. 

To avoid the risk of igniting a negative feedback

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